AT&T Move into Advertising

Believe it or not, AT&T is now thinking about advertising. Who would have thought 10 years ago that the company would put out a press release expecting targeted advertising related to its video and wireless services to become a billion dollar business in the next three years? No question that times have changed and AT&T must look for any additional source of revenues to keep up with the coming competition from OTT (Over-The-Top) providers, such as Google, Yahoo and Microsoft.

Let’s spend some time on this. Point taken, AT&T's combination of being the largest U.S. broadband Internet provider, a wireless carrier and its nascent U-Verse video service delivered over broadband networks provides it with a unique opportunity to sell advertising. The company thinks there is a good opportunity in advertising especially given the assets their business has available, such as lots of wireless subscribers and their latest move into TV.

Further, AT&T plans to spend over $6 billion to build out the infrastructure for U-Verse, which started rolling out last year over high-speed fiber-optic networks. The service will be built on top of Microsoft Corp. Internet protocol television (IPTV) platform and will be available to 18 million homes in 13 U.S. states by the end of 2008. Expectations are very high as the company believes the U-Verse service will allow advertisers to better target customer interests and explore new interactive ways to TV watchers because it runs on top of an Internet network. The final piece of the puzzle would be to find a partner to sell and serve advertising over the IPTV platform to consumers. Even though Microsoft will be providing the IPTV platform, it is still premature to say that they will be the preferred partner that AT&T is looking for, especially as they trail Google Inc. and Yahoo Inc. in Web advertising sales.

Bottom line, AT&T move into advertising makes absolute sense. They have the infrastructure, the strategy, the money and the strength muscle to make this business succeed. I wonder, however, whether they would be able to compete with experienced advertising powerhouses already out there, which started out from scratch and learned to compete against Over-The-Top providers. There will be some learning curves and mistakes on the way, but I think AT&T has what it takes to generate that $1Billion in the next three year. Time will tell.